Sri Cotton Concern Vs HDFC Bank Limited (DRAT Kolkata)
The appeal before the Debts Recovery Appellate Tribunal Kolkata arose from an order dated 7 February 2024 passed by DRT-II, Hyderabad, dismissing an interlocutory application challenging territorial jurisdiction. The original application (O.A. No. 843 of 2019) was filed by the respondent bank for recovery of ₹14,87,82,008.31 along with interest. The bank stated that the cause of action arose when the borrower made the last payment on 29 December 2018, the loan account was classified as NPA on 31 March 2019, and a demand notice under Section 13(2) of the SARFAESI Act, 2002 was issued on 28 June 2019.
During the pendency of the recovery proceedings, the appellant filed an interlocutory application contending that DRT Hyderabad lacked territorial jurisdiction. It was argued that the cause of action arose at Guntur in Andhra Pradesh, where the borrower resided and the secured property was located, and that jurisdiction lay with DRT Visakhapatnam. The appellant also contended that transfer of the loan account to the bank’s Special Operations Department was not intimated, and reliance was placed on a memo filed in SARFAESI proceedings stating that SARFAESI action had been withdrawn.
The respondent bank opposed the application, stating that once the account became irregular it was transferred to the Special Operations (Recovery) Department at Hyderabad, from where recovery actions and notices were issued. According to the bank, the appellant was duly served with notices but failed to regularise the account, and the application challenging jurisdiction was intended only to delay the proceedings. It was also clarified that only the notice under Section 13(4) of the SARFAESI Act had been withdrawn, not the entire SARFAESI action.
The DRT dismissed the interlocutory application, holding that since the Section 13(2) notice was issued from Hyderabad, the DRT at Hyderabad had jurisdiction to entertain the recovery application. On appeal, the appellant argued that Section 19(1)(a) of the Recovery of Debts and Bankruptcy Act, 1993 had been misconstrued, reiterating that property location and borrower residence determined jurisdiction.
The Appellate Tribunal examined Section 19(1)(a), which permits a bank or financial institution to file a recovery application before a tribunal within whose jurisdiction the branch or any other office of the bank maintaining the account in which the debt is outstanding is situated. The Tribunal noted that it was undisputed that the borrower’s account had been transferred to the bank’s Special Operations Department at Hyderabad, which was maintaining the account. Correspondence on record also showed that SARFAESI notices were issued from Hyderabad and that withdrawal of action under Section 13(4) was communicated by the Hyderabad office.
On this basis, the Tribunal held that the recovery application was maintainable before DRT Hyderabad and that no illegality or infirmity existed in the impugned order. The appeal was dismissed, and the order of DRT Hyderabad was confirmed. Considering that the recovery application had been pending since 2019, the Tribunal directed the DRT to proceed expeditiously and decide the matter preferably within eight weeks. No order as to costs was passed.
FULL TEXT OF THE ORDER OF DRAT KOLKATA
Instant Appeal has arisen against an order dated 7th February 2024 passed by Learned DRT- 2 Hyderabad in I.A. No. 1091 of 2023 arising out of O.A. No. 843 of 2019 (HDFC Bank versus Ms. Sri Sri Cotton Concern).
2. Heard the Learned Counsel for the parties and perused the records
3. An O.A. No. 843 of 2019 was filed by the Respondent Bank for issuance of a Recovery Certificate for Rs.14,87,82,008.31ps along with interest. It is stated that the cause of action for filing the O.A. arose as on 29.12.2018 when the defendant/ Appellant made last payment to the Bank and on 31.03.2019 when the loan account became NPA and on 28.06.2019 when the Bank issued Notice under Section 13(2) of the SARFAESI Act, 2002 to the defendants. Pending O.A., I.A. No. 1091 of 2023 was filed by the Appellant contending that the territorial jurisdiction for the O.A. lies at DRT Visakhapatnam as the cause of action arose at Guntur at Andhra Pradesh. Transfer of account to the Special Operation Department by the Bank was not intimated to the Appellant by the Bank. Hence, the DRT at Hyderabad has no territorial jurisdiction to try the O.A.
4. Respondent Bank filed a petition before the DRT stating that when the loan account became irregular, it was transferred to the Operation Department (Recovery Department) then they initiated appropriate legal action for the recovery of the outstanding amount due to the Bank. Account of the Appellant was transferred to the Special Operation Department from where notices were issued to the Appellant who failed to regularize the account in spite of Notice dated 28.06.2019. Hence, the cause of action arose at Hyderabad. Application is moved by the Appellant to drag the proceedings.
5. Learned DRT dismissed the I.A. on the ground the Notice under Section 13(2) of the SARFAESI Act, 2002 dated 28.06.2019 was issued by the Bank at Hyderabad. Hence, DRT Hyderabad has jurisdiction to try the O.A.
6. Learned Counsel for the Appellant would submit that provisions of Section 19 (1)(a) of the Recovery of Debts and Bankruptcy Act, 1993 have been misconstrued by the Learned DRT. The property was located at Guntur, borrower was also residing at Guntur. Learned Counsel has placed reliance upon the order dated 15.06.2023 wherein a memo dated 02.11.2022 filed before the Learned DRT in S.A. proceedings was relied upon wherein it is stated that all SARFAESI action initiated by the Bank have been withdrawn. Accordingly, Hyderabad DRT has no jurisdiction to try the case.
7. Per contra, Learned Counsel for the Respondent Bank would submit that the provisions of Section 19 (1)(a) of Recovery of Debts and Bankruptcy Act, 1993 specifically provides that the O.A. can be filed to any Tribunal within the local limits of whose jurisdiction Financial institution is maintaining an account.
8. Learned Counsel for the Bank would further submit that only Notice under Section 13(4) of the Act was withdrawn by the Bank.
Section 19 (1)(a) of the Recovery of Debts and Bankruptcy Act reads as under:
“[19. Application to the Tribunal (1) Where a bank or a financial institution has to recover any debt from any person, it may make an application to the Tribunal within the local limits of whose jurisdiction,-
[(a) the branch or any other office of the bank or financial institution being; or] is maintaining an account in which debt claimed is outstanding, for the time being]”
8. A bare perusal of the same would reveal that the Application under Section 19 of the Recovery of Debts and Bankruptcy Act. 1993 can be filed in any branch or any other office of the Bank or financial institution is maintaining an account in which debt claimed is outstanding. Undisputedly, Appellant transfer his account to the Special Operation Department located at Hyderabad. Now the account is being maintained by Hyderabad Branch. Perusal of letter dated 16.03.2023 reveals that the Notice under Section 13(4) of the Act was withdrawn by the Bank i.e. HDFC Bank Limited (Department for Special Operations) Hyderabad. Accordingly, the Branch at Hyderabad was maintaining the account from where Notice under Section 13(2) of the SARFAESI Act, 2002 was issued. Application under Section 19 of the Recovery of Debts and Bankruptcy Act, 1993 would be maintainable at DRT Hyderabad. I do not find any illegality or infirmity in the impugned order. Appeal lacks merit and is liable to be dismissed.
ORDER
Appeal being Misc. Appeal No. 84 of 2024 is dismissed. Impugned order dated 7th February, 2024 passed by Learned DRT – II Hyderabad in I.A. No. 1091 of 2023 in O.A. No 843 of 2019 is confirmed. Since the O.A. is pending since 2019 for recovery of Rs.14,87,82,008.31ps, Learned DRT is hereby directed to proceed with the O.A. expeditiously and decide the same preferably within a period of eight weeks from the date a copy of this order is placed before the DRT.
No Order as to costs.
File be consigned to Record Room.
Copy of the Judgment/ Final Order be uploaded in the Tribunal’s Website.
Order signed and pronounced by me in the open Court on this the 14th day of January, 2026.
